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HD Media’s lawsuit blames Google, Facebook for its own failures

The print industry made a number of bad decisions over the last two decades. Now it wants Facebook and Google to be its scapegoat.

The print industry made a number of bad decisions over the last two decades. Now it wants Facebook and Google to be its scapegoat.

(Photo: Pixabay, Graphic: The Desk)

A small newspaper chain in West Virginia is making big headlines of its own after it filed a federal lawsuit last week against Facebook and Google for alleged monopolistic practices.

The complaint filed by HD Media alleges the two tech companies are threatening to make newspapers obsolete through their dominance of the digital ad market.

“Google has vertically integrated itself, through hundreds of mergers and acquisitions, to enable dominion over all sellers, buyers, and middlemen in the marketplace,” the lawsuit contends. “It has absorbed the market internally and consumed most of the revenue. Google’s unlawful anti-competitive conduct is directly stripping newspapers across the country, including [newspapers] of their primary revenue source.”

Google primarily focuses on medium- to large-sized businesses, video streams and online-only services for its digital advertisement offerings. It operates the video platform YouTube, which accounts for a sizable chunk of streaming video connections in the world and integrates natively with its Google Ads and AdSense.

Facebook targets small businesses with its ad offerings, though it also generates a sizable chunk of revenue from content creators. Recently, it branched out into classified ads with its “Facebook Marketplace” feature, and it also offers advertising against Instagram, its photo and video sharing platform.

Google and Facebook together hold a little more than 60 percent of the digital ad market in the United States, according to some estimates. Amazon, another tech giant, is quickly growing their own digital ad business with a little more than 8 percent of the digital ad space.

In 2018, Google and Facebook formed an unusual pact called “Blue Jedi” in which both companies allegedly agreed to share resources and strategize together in order to grow their own respective share of the digital ad space. State prosecutors alluded to Blue Jedi in an unredacted complaint connected to a federal anti-trust suit filed  against both companies last month. Details of Blue Jedi were first reported by the Wall Street Journal.

A Google spokesperson said its business dealings through Blue Jedi were legal and otherwise misrepresented in court filings reviewed by Journal reporters. The spokesperson said its business deal with Facebook was well-known. A Facebook spokesperson echoed those sentiments.

But the business deal is now the crux of the lawsuit filed by HD Media last week, which alleges the deal pushed out newspapers like theirs which rely primarily on advertising revenue to remain afloat.

Less apparent is the newspaper industry’s own failure to change with the times: As digital media companies like Facebook and Google created ad solutions that allowed businesses to target consumers based on certain criteria, newspaper groups viewed the emerging technology as nothing more than a fad. As newspaper ad revenue started to decline, some of those chains — most notably, McClatchy and Gannett — merged their operations, assuming the bigger they got, the more insulated they were from online competitors.

Both assumptions proved to be wrong. Now, smaller newspaper groups are crying foul as their decision to ignore emerging technology in favor of a broken, outdated business model — and they’re blaming Facebook and Google for their own bad decisions.

Facebook and Google themselves are not unsympathetic targets — they built a business on offering free services to consumers while often concealing exactly how they were collecting and re-selling the data of their users. Facebook, in particular, has a bad habit of modifying their privacy tools in a way that forces users to become more open with their online activity. And both companies offer digital advertising tools and web trackers that surveil users across websites, even when they don’t use Google or Facebook products.

But the lawsuit filed by HD Media doesn’t hit on these points. Instead, it claims that “the freedom of the press is not at stake — the press itself is not at stake.” Because people aren’t buying newspaper ads anymore. Because Facebook and Google offered a better product for advertisers, and newspapers did not.

It’s hard to believe HD Media’s exaggerated claims will have much merit if it actually proceeds to a jury trial, which the company has demanded. Based on that line alone, Facebook and Google could easily point to examples in other parts of the media industry that are thriving. Television, in particular, was not too far behind newspapers in trying to hold on to an outdated delivery mechanism. Then came Netflix, and the game was changed. Over the last five years, networks have pivoted to offering their own streaming TV services, and while none have been able to eclipse or even come close to Netflix’s dominance, each enjoys its own form of success and solvency.

The key difference is, the television industry didn’t complain about Netflix’s dominance. They adapted because of it. It’s not too late for newspapers to do the same. But first, at least one will have their day in court.

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).